However, it’s still too early to say what sort of discounts IS will be able to pass on to service providers, which will ultimately affect what end users pay.
Missaikos says IS is locked in meetings with Telkom about how it will implement the price cuts. IS carries a significant percentage of all digital subscriber line (DSL) traffic in South Africa, and provides facilities to large Internet service providers such as MWeb and WebAfrica.
Last Thursday, Telkom’s wholesale services division announced sweeping cuts of up to 63% across its product range, including IP Connect and metro Ethernet.
IP Connect, which is a big input cost for service providers, would be cut by up to 63%, Telkom said. It explained the cuts as its wholesale services business “positioning itself in order to service an exponentially increasing demand for copper and fibre-based broadband services”.
Missaikos says IP Connect prices could indeed fall by as much as 63%, but what is not clear is what the conditions are that service providers must agree to in order to secure that 63%. He says Telkom is attempting to protect its copper digital subscriber line (DSL) network as far into the future as possible.
“That discount [the 63%] is there based on conditions, but to accept those conditions, you have to take a big bet,” Missaikos explains. “You have to assume that DSL will be around for the next 20 years, which we’re not clear on just yet. We’ll definitely maximise these discounts on behalf of our clients at much as we can. We owe this to our clients. This will definitely be very beneficial for our clients.”
Further clarity should be available within a week, but Missaikos hopes the net result will be a significant decrease in consumers’ broadband bills or hugely improved overall value they are offered for the same price they are paying now.
He says he is encouraged by Telkom’s price cuts, saying they will be “to all of our benefit”.
“I don’t think DSL is dead. It has plenty of legs. It will always be price competitive.”
Those hoping fibre to the home will replace copper in the short term will be disappointed, he says.
“The economics of fibre have not been clearly thought out. There will be consolidation around the new emerging players. This is a scale business and it’s not as simple as putting up a mast to cover a community. You need very deep pockets and long horizons [for return on investment].” — © 2015 NewsCentral Media